Former Scientologist indicted in financial scheme that victimized other ex-church members

On August 13, a man named Frank Pate was indicted on federal wire fraud charges in the Eastern District of Texas. According to Pate himself, who has written a short blog about his legal troubles, he was arrested in Phoenix on September 2 and arraigned in Texas later in the month. At the arraignment he entered a plea of not guilty.

Pate was the CEO of something he called the Infinity Companies, an investment firm. According to the indictment, from July 2004 to April 2013 Pate perpetrated “a scheme and artifice to defraud persons and to obtain money and funds from persons by means of false and fraudulent pretenses.”

The indictment accuses Pate of using new investors to pay off earlier investors, a method which is known as a “pyramid” or “Ponzi scheme.”

The amounts are not in the Bernie Madoff range. The indictment states that proceeds from the scheme amounted to about $1.8 million. However, the method is interesting. Pate is a former Scientologist, and several of the people claiming to be victimized by him are as well.

“He took advantage of it,” one victim tells us. “In the beginning he would sort of quote Scientology, giving sort of an off-beat version of it” in order to build confidence in an investor.

One person who helped the FBI investigate Pate is Michael Laws, a former Scientologist who lives in Texas. Laws tells us he invested with Pate about ten years ago, heard complaints about him, asked for his money back, and ran into stiff opposition from Pate.

“It was vicious,” Laws says, but he eventually got his money back. When the FBI later asked for his help, Laws says he was willing to give it. He tells us he knows about ten people who say they were victimized by Pate, and some — but not all — are former Scientologists.

One of them talked to the Underground Bunker on condition that we not name him. The person insisted that it made sense to trust a former member of Scientology with financial transactions.

“Most Scientologists are really ethical people. I know that sounds Pollyanna, but it’s true,” the person says.

The person says he’s out tens of thousands of dollars, and doesn’t expect to get it back. “Nobody’s going to get any money back, but the point is to stop him.”

According to a timeline Pate put together at his website, in 1967 he was born in Tustin, California to a military family that was Roman Catholic. He got involved in Scientology in the 1990s, joined staff in Tustin in 1997 and left the church in 2005. He continued to practice Scientology outside of the church with other former members. He also indicates that he has worked on a book about his experiences in the church.

In his blog, Pate says that he’s determined to fight the charges, which he characterized as “out in left field”: “As we start to move forward to address the charges, we are already seeing many elements of the case that are way out in left field. This is not surprising. What has been so fascination bound is how much closer my wife, family, and a few friends have become during this whole proceeding.”

The indictment accuses Pate of enticing people to invest in his business of trading foreign currencies, but then “instead of using the investors’ money for trading foreign currencies, Pate used the investors’ money for his own benefit.”

Scientology watchers will be reminded of the case of Reed Slatkin, a Scientologist who bilked investors (many of them other Scientologists) out of hundreds of millions of dollars in what was one of the largest Ponzi schemes in history until Bernie Madoff was exposed. Slatkin was sentenced to prison in 2003 and released last year.

Here’s the indictment of Pate. We’ve emailed him at his website, and if we hear from him, we’ll add to the post.

 

Frank Pate Indictment

 
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Posted by Tony Ortega on October 14, 2014 at 07:00

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